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Philip Morris Readies $350 Million Cigarette Push

Philip Morris Cos. will invest $350 million to promote and market its premium cigarette brands at retail, the company announced today.

Philip Morris plans to increase promotional spending -- discounts given to retailers and consumers -- on its four focus brands, Marlboro, Parliament, Virginia Slims and Basic in an effort to continue to improve their share performance.

Market share

Market share for the company's four primary cigarette brands rose 0.2 points in the quarter, fueled by retail share growth of Marlboro and Parliament. Philip Morris' promotional support for these key brands decreased in the second quarter, compared to the same period last year. This, coupled with retailers heavily buying Philip Morris brands before the company's April 2002 price increase, led to a 13.8% decrease in shipment volume, according to the company.

But the domestic tobacco unit remained a money-maker. Operating income for the unit was up

5.1% to $1.5 billion from $1.4 billion in the second quarter of last year, despite the unit's 4.4% decrease in net revenue to $4.9 billion from $5.1 billion.

Earnings for PM up

Combined net earnings for Philip Morris' tobacco, food, financial and beer units in the second quarter were up 14.1% to $2.6 billion, or $1.21 per share, from $2.3 billion, or $1.03 per share, in the year earlier period, and net revenue increased 1.5% to $21.1 billion from $20.8 billion last year.

Philip Morris' operating units include domestic tobacco unit Philip Morris USA, international tobacco unit Philip Morris International, the North American and international divisions of Kraft Foods, financial services unit Philip Morris Capital Corp. and beer marketer Miller Brewing Co.

Though Philip Morris sold Miller to South African Breweries on July 9, the beer unit was included in Philip Morris' second-quarter earnings.


Cara B. DiPasquale, AdAge.com. July 18, 2002

Copyright © 2002 Crain Communications Inc.. All rights reserved.